During 20X4, a large shareholder of Seremban Ltd donated some inventory to Seremban Ltd with a fair value of $1 million.This $1 million is an asset and:
A)a liability to Seremban Ltd
B)a revenue to Seremban Ltd
C)a part of equity of Seremban Ltd
D)a contingent liability of Seremban Ltd

Question

Quizplus · Accepted Answer

When inventory is donated to a company, the fair value of the inventory is recognized as revenue, as it increases the assets of the company without a corresponding increase in liabilities or a direct investment by the owners.

During 20X4, a Large Shareholder of Seremban Ltd Donated Some